Oil prices dip on refinery shutdown

Posted August 31, 2017

About 16% of total US refining capacity, or 3 million barrels per day (bpd), has been lost since Hurricane Harvey descended on Texas on Saturday as the most powerful storm to hit the state in over 50 years, killing at least nine people and causing catastrophic flooding in the heartland of America's petroleum industry.

At the same time, U.S. gasoline prices spiked to their highest level since the middle of 2015 after the storm knocked out almost a quarter of USA refineries.

West Texas Intermediate, the US benchmark for the price of oil, has pulled far away from the global benchmark Brent, but an emailed report from London oil broker PVM said it's "only a question of time for WTI-priced USA crude oil to start strengthening against other benchmarks". While it has been downgraded to a tropical storm, ongoing torrential rains have flooded numerous refineries in Texas and Louisiana, the heart of the American petroleum industry.

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Oil refiners have shut down around 1 million bpd of refining capacity in Texas, Bloomberg reported on Friday, just as the storm was getting ready to hit the Gulf coast.

About 26 percent of Gulf natural gas production is offline, or about 828 million cubic feet (23.4 million cubic meters) per day, BSEE said. Brent's front-month finished up $0.11, or 0.2%, at $52 a barrel on London's Intercontinental Exchange.

However, the assessment does not include the impact of storm Harvey.

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"We are thus lowering our Brent oil price estimates to $55 per barrel from $60 per barrel in 4Q17 (and) to $57 per barrel from $64 per barrel in 2018", Jefferies bank said.

Gasoline rose still higher post-settlement, after sources told Reuters that Motiva was shuttering the largest us refinery.

Crude markets were also looking at disruptions in Libya and Colombia. "Gasoline prices, on the other hand, are higher due to the refinery shut ins", Jenna Delaney, a Senior Oil Analyst with PIRA Energy Group, a unit of S&P Global Platts, told RT.

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Sharara, which at 280,000 bpd is the OPEC member's largest oilfield, has been shut for around a week because of militia blocking a pipeline linking it to the Zawiya oil terminal.